Home Business Or Freelance?
According to the Global Wage Report for 2012-2013, the growth of salaries across the globe remains significantly below the levels recorded prior to the global recession of 2008.
This is prompting action from employees throughout the world, who are instead turning to entrepreneurship, freelancing, and owning their own home-based businesses in a bid to achieve financial wealth and independence.
While those in regular employment often describe home business ownership and freelancing as one the same thing, there are a number of subtle differences which distinguish the two. Before you commit to leaving your job and operating independently, however, it is crucial that you understand these variations and choose the option that is most viable.
The Key Differences
With this in mind, what are the fundamental differences between home business ownership and freelancing and how can they influence your long term choice?
Consider the following:
1. Global Reach And Marketing Strategy
A freelancer running a business from home typically markets and sells a simple service, which can be delivered quickly and efficiently to clients across the globe. There is also a significant rise in work from home jobs for freelancers to pursue. The fact that small businesses have a more complex infrastructure and sales process means that they often take a different route to market, however, usually by targeting local consumers and building a reputation within their home county.
The choice between these two options is often dependent on the service or concept that you are marketing, while the path that you take will also determine your target market and promotional strategy.
2. Your Tax Requirements And Financial Responsibilities
As a freelancer, you are most likely to operate as a sole trader, whereas the establishment of a business (even one working from home) may require you to register as a limited company. There are significant differences in terms of legal and tax requirements, and you need to pay attention to these if you are to maximize your income.
More specifically, as a sole trader you are self-employed, while your role as a business leader means that you service the company as an officer or a director. In terms of tax, limited companies are liable to pay corporate tax on their income, while associated employees must also be subject to PAYE and NICS on their earnings.
3. Start-Up Costs And Building Streams Of Income
The cost of starting a home-based business can sometimes be considerable, especially with regards to corporate tax liability, employing staff and developing an infrastructure. In contrast, you can establish yourself as a freelancer with minimal start-up costs, and many independent contractors begin to market their services while still employed in a full time job.
As an independent contractor, you also have a greater degree of flexibility when it comes to developing viable streams of income. Many contractors operate a business from home while holding a part-time or full-time job.
The Bottom Line
To many, the differences between freelancing and business ownership are negligible, and this misconception is created by the general appeal of working independently. In fact, these two options offer very different boundaries and rewards to individuals, and the wrong choice can cause stress, career disruption and significant financial loss.
With this in mind, it is crucial that you consider your options carefully before choosing to leave full time employment and seek financial independence from freelance professional services or starting a business from home.